Source: United States Department of Justice News
LOS ANGELES – Two downtown Los Angeles residents were arrested today on a federal criminal complaint alleging they fraudulently obtained more than $300,000 – and attempted to obtain an additional $1 million – in COVID-relief loans for several companies they claimed to own and operate.
Sean Schoepflin, 42, a.k.a. “Sean Fitzgerald,” and Erika Leon, 44, a.k.a. “Erika Fitzgerald,” are each charged with one count of wire fraud, according to a complaint that was unsealed today. They are expected to make their initial appearances this afternoon in United States District Court.
According to an affidavit filed with the complaint, from April 2020 to October 2021, Schoepflin and Leon made numerous false statements to the United States Small Business Administration to secure more than $300,000 – and attempt to secure an additional $1 million – in Economic Injury Disaster Loans (EIDLs) for their businesses.
Schoepflin and Leon allegedly falsely stated that the business entities they created had several employees and several hundred thousand dollars in revenues, and that they would use the EIDLs for working capital for those businesses. Schoepflin also allegedly falsely stated on loan applications that he had never been convicted of a felony.
In fact, their purported businesses – Capital Adventures Inc., Lady Capital Inc., Digital Army Ltd., and Lady Pictures LLP – had no employees and little to no revenue, they used the EIDLs largely for personal expenses, and Schoepflin had previously been convicted of multiple felonies.
For example, Schoepflin falsely stated in one loan application that Capital Adventures had revenues of $560,000 in the 12-month period from February 1, 2019 to January 31, 2020, the affidavit alleges. In June 2020, when an SBA employee sent an email to Schoepflin requesting Capital Adventures’ business tax return to show proof of the company’s existence as a business entity, Schoepflin allegedly sent an unsigned tax form that stated that Capital Adventures had gross sales or receipts of $625,112 in 2019.
In fact, Capital Adventures did not file an IRS Form 1120 for 2019 until July 2021, after it requested and was denied an increase for its EIDL, according to the affidavit. Furthermore, between February 2018 and April 2020, Capital Adventures’ bank accounts had total deposits of approximately $35,000.
The FBI and the Treasury Inspector General for Tax Administration investigated this matter.
Assistant United States Attorneys David Ryan and Solomon Kim of the Terrorism and Export Crimes Section are prosecuting this case.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic. One source of relief provided by the CARES Act is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April, Congress authorized more than $300 billion in additional PPP funding.
The EIDL program is designed to provide economic relief to small businesses that are currently experiencing a temporary loss of revenue. EIDL proceeds can be used to cover a wide array of working capital and normal operating expenses, such as continuation of health care benefits, rent, utilities, and fixed-debt payments.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at (866) 720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.